Good day, everyone and welcome to the ATK third quarter fiscal year 2008 earnings release conference call. Today's call is being recorded. At this time, I would like to turn the call over to ATK's Vice President of Investor Relations, Mr. Steve Wold. Mr. Wold, please go ahead, sir.

Steve Wold - Vice President, Treasurer, and Investor Relations

Thank you, Eulanda, and good morning. Good morning all. Welcome to our third quarter fiscal '08 earnings call and webcast. With me today, I have Dan Murphy, ATK's Chairman and CEO and John Shroyer, Senior Vice President and Chief Financial Officer.

During today's call, we'll make several forward-looking statements regarding our current projections for future results. These statements we make under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of ‘95. These forward statements are based on our best estimates, which we make based on our understanding of information known to us today and are subject to the risks and uncertainties that face any business. Many of those risks and uncertainties are discussed in detail in our SEC filings, including our most recent 10-Q, 10-K, and the 8-Ks, and I would encourage you to review those filings. Our actual results could differ materially from the projections that we make today.

Certain financial measures we use today will be considered non-GAAP financial measures and we have included a reconciliation of these items to the most comparable GAAP measures on our website at atk.com, where we've provided additional background data as well.

Dan will open up today's call with some brief context as to the quarter and comments on the outlook and John will then discuss some of the financial details of the quarter. And at that point, we will open up the phones for questions from our listeners.

With that said, I will turn it to you Dan.

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you Steve and good morning everyone, and again thank you for joining us today. Our third quarter results continued the strong performance we have achieved in our fiscal year '08 first half. I am particularly pleased with the double-digit organic sales growth across all three operating groups. Our businesses are executing exceptionally well. As a result of this strong performance, we continue to see FY ‘08 revenue in excess of $4.1 billion and are increasing our EPS guidance to a range of $6.25 to $6.35. FY ‘08 orders of more than $6 billion establish a very strong base for our businesses in our FY ‘09 and beyond, giving us confidence in our ability to sustain up to 10% organic sales growth for the foreseeable future.

My confidence in our long-term growth profile is further underpinned by the recent US Army announcement to extend our Lake City small-caliber ammunition contract by four years. This adds about $2 billion in sales through 2014. We are proud of our partnership with the US Army and appreciative of the confidence this important customer has in our performance.

Earlier this month, we announced our intent to acquire the aerospace businesses of MacDonald Dettwiler, Canada's largest and most technologically advanced space company. Upon closing next quarter, we will establish the ATK Space Systems group with first full-year sales of about $900 million. We are confident this new business will achieve sustained double-digit sales growth, while increasing ATK's aggregate EBIT margin a full 100 basis points.

Based on our momentum in all of our growth areas, we are confident in our ability to continue delivering long-term double-digit earnings growth for our shareholders.

With that, I will turn it over to John.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Thanks Dan. Good morning everyone. To reiterate what Dan said, we are very pleased with the performance on the quarter and look forward to another strong finish to the year. We are raising our full-year EPS guidance to a range of $6.25 to $6.35 based on strength across the board in all three business groups, and we continue to see full-year sales that we be in excess of $4.1 billion, including organic sales growth in excess of 12%.

Sales in the quarter rose 17% to $1.1 billion. Organic sales in the quarter rose 13%, with all three groups achieving double-digit organic sales growth. The company is strong and getting stronger. Comparing apples-to-apples on the quarter, earnings were up 16% to $1.65 over the same period last year. As you will recall, last year's $1.53 included $0.11 catch-up benefit from the extension of the Federal research and development tax credit.

I also want to reaffirm our orders guidance for you. For the year-to-date, orders are up 75%. The $670 million of orders in the quarter keeps us right on track to record more than $6 billion of orders on the year. The quarterly decline from last year was due in part to the anticipated reduction in strategic missile propulsion, as well as the timing of orders at Lake City. Our full-year forecast remains very strong. Just yesterday, we announced an order of more than $50 million for modernization at Lake City. We expect an additional small-caliber ammunition order in the fourth quarter. As we have previously said, we expect an RSRM extension order in excess of $800 million.

In short, fiscal year '08 will be the largest order year in our history, giving us a substantial backlog and even greater confidence in our out-year performance. That backlog and our market positions give us significant confidence in our future and in particular continued visibility into the strength of our cash generation. Not only are we sales and order growth across the business, we continue focusing our attention on margin improvements, which I am happy to report were up again by 25 basis points.

Operational efficiencies, including our continued focus on supply-chain management, combined with our reduced pension expenses, are delivering improvements across all of our businesses. All-in, we continue driving our margins for 11% in fiscal year '09, a more than 100 basis point improvement over last year. We continue to expect free cash of approximately $260 million by the end of year after funding approximately $100 million in CapEx to prepare for future growth.

Now, I like to breakdown the quarter by each of the business groups. Sales in the Ammunition Systems group were up 15% from a year-ago to $381 million. We are very pleased to see continued growth in our civil ammunition sales, as well as strong growth in our medium-caliber systems business. For the full-year, we continue to expect sales across the group to increase by approximately 15%. The EBIT rate in the Ammunition Systems group remains strong at 9.8%, once again reduced pension expenses, which benefited all three groups, contributed to strong margins. Higher raw material costs and the evolving mix of sales partially offset this strength. For the full-year, we continue to expect margins in the mid-9% range.

Sales in the Launch Systems group were up 12% to $308 million compared to $274 million a year earlier. As expected, work on the Aries I program continues to gain momentum, offsetting the anticipated slowdown in shuttle and strategic missile programs. We continue to expect full-year sales in the group to be up by over 10%. EBIT at Launch Systems was 14% compared to 12.6% in the prior-year quarter. This was driven by reduced pension expense, as well as the favorable resolution of certain prior-year overhead rate matters, a process we go through every year and one, which was part of our previous guidance. We continue to expect margins for the group on the full-year to mirror the third quarter numbers and approach 14%.

Sales in the Mission Systems group rose 22% to $366 million from $299 million in the prior-year quarter. Organic growth was up 10%, highlighted by higher sales in defense electronics, additional works on the Aries I Launch Abort Systems motor, as well as the strong satellite sub-system sales. Swales Aerospace contributed $38 million in sales. We remain on track for full-year sales in the group to be up by 10% or more. The Mission Systems' EBIT rate remained steady at 10%. The quarter included reduced pension expenses and improved margins in defense electronics, offset by increased selling costs on strategic program pursuits, and provisions for bad debt.

As we have said on prior calls, we expect a full-year tax rate of approximately 36%. Again, this assumes that Congress will extend the R&D tax credit in the fourth quarter. For the year, we expect an average share count of near 35.5 million.

As you know, our third quarter call is when we provide guidance for fiscal year '09. And from where we stand now, FY ‘09 looks to be yet another exceptional year. We expect EPS to hit in the range of $7.10 to $7.30 a share, translating to a growth rate of 12% to 17%. FY '09 sales are expected to be approximately $4.5 billion, consistent with our 8% to 10% growth targets. We expect fiscal year '09 to be another year of strong free cash flow for the company at $260 million. Given current assumptions, we expect pension expenses to be in the low $40 million range. We will finalize our assumptions at the end of March and provide an update on the next call. Our preliminary tax rate assumption is approximately 36% to 37% and we expect an average share count of approximately 36 million.

While the FY '09 ATK guidance, I just walked through, does not include any guidance related to the recently announced acquisition of MDA's Information Systems and Geospatial Services businesses, I want to clarify a few key assumptions for you. We currently expect to close the acquisition in the first quarter of fiscal year '09. The calendar year 2008 sales for the MDA business we plan to acquire are expected to be approximately $500 million. EBIT margins are expected to run at nearly 20%, which includes the expectation of continued Canadian R&D tax credits, which at historical levels are approximately 4% of revenue. As we have said previously, the transaction is expected to be neutral to fiscal year '09 EPS and accretive thereafter.

To recap, we had a great quarter. Apples-to-apples, EPS was up 16%, sales increased 17%, and we achieved 13% organic growth. We'll finish the year with record orders and backlog. We continue improving our margins. We're raising our full-year guidance and establishing a baseline of 12% to 17% EPS growth for the next year.

With that, I'll turn it back over to Dan.

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you John. Eulanda, we're prepared for the Q&A session, if you want to take control, please?

Question and Answer

Operator

Certainly. [Operator Instructions]. We'll hear first from Robert Spingarn with Credit Suisse.

Pete Sibitsky - Credit Suisse

It's Pete Sibitsky. How are you guys?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Hi Pete.

Pete Sibitsky - Credit Suisse

Dan, on MDA, just want to get a sense, are you getting any pushback from either the Canadian or the US regulators? How is it going there? And also do you think you will have to issue any equity to finance it?

Daniel J. Murphy - Chairman and Chief Executive Officer

We have already spoken about the possibility of equity. At this juncture, we don't have anything further to say about that. Regarding regulators, we see no difficulty with either US or Canadian regulators. We have decided to apply for approval under the Canada Investment Act, which is not a… probably a three-month process of discussions with Canadian industry officials to assure them that this particular transaction would not have an impact... negative impact on Canadian industry. We've gotten some spirited discussion in the Canadian press associated with continuation of the hollowing out of Canadian industry. And in fact, what we're doing is ensuring the strength of the Canadian space infrastructure by opening new markets to it. But, that dialog will play out… it will play out in the Canadian legislator and we're confident in the end that we're going to be just fine. But, it's complicated.

Pete Sibitsky - Credit Suisse

Just one follow-up for now. Any plans to protest the MRM decision?

Daniel J. Murphy - Chairman and Chief Executive Officer

No. We don't. We actually think that our competitor had a bit of a better solution than we did.

Pete Sibitsky - Credit Suisse

Okay. Thanks, I'll get back into the queue.

Daniel J. Murphy - Chairman and Chief Executive Officer

Okay.

Operator

And we'll take our next question from Robert Stallard with Banc Of America.

Robert Stallard - Banc Of America Securities

Good morning guys.

Daniel J. Murphy - Chairman and Chief Executive Officer

Good morning.

Robert Stallard - Banc Of America Securities

Just a follow-up on the MRM. [inaudible] a couple of contracts you didn't win this year, although you’ve had fantastic bookings. Do you think there is anything as a business that you'd draw your conclusions from these contract decisions that you can work on to improve going forward?

Daniel J. Murphy - Chairman and Chief Executive Officer

That's absolutely the case. We learn from every undertaking and of course we tend to learn more from those that we don't win than from those that we do. With respect to MRM, the lesson that we learned was to make sure that we tap into the industry for best solutions for components before we undertake our own effort to build a brand new one. That was the mistake we made there. And so, we ended up being out of time, frankly, when the proposal was due. What I mean by that is we are developing our own seeker instead of going to an L-3 or a BAE or Raytheon… in this case not Raytheon for an off-the-shelf solution. That's part of the process of maturing as a system integrator and prime contractor. With regard to the upper stage of the Aries I, that was a very tough competition. As you know, we won on all technical merits and the NASA decided based on cost, as I said then, there is a shift in NASA priorities and so we have internalized that and we’ve had lots of discussions with the NASA centers subsequently to ensure that we know what competition is going for, just exactly what those priorities are.

Robert Stallard - Banc Of America Securities

Do you think, Dan, your competitors are getting a little bit more smart about how to beat you?

Daniel J. Murphy - Chairman and Chief Executive Officer

I think that they are catching on to the fact that our affordable information [ph] approach is very attractive to our customer base. Yes, we are on the radar screen, no question. Also part of our maturation process is to enter into senior level dialogues with other companies in our industry to see where we made partner and we have been quite successful in that regard with Raytheon, Boeing, Northrop Grumman, we don't have to compete every time and often times what we bring to the table at a systems level is very attractive to them. So, again, it is just… it's part of our growth process.

Robert Stallard - Banc Of America Securities

And second. On Ammunition, you called out another good quarter for the civil side and medium caliber. What's your confidence in these two areas sustaining this growth through fiscal '09?

John L. Shroyer - Senior Vice President and Chief Financial Officer

We will. Medium caliber… let me just talk about Ammunition. We are now number one in the industry in sporting ammunition, law enforcement ammunition, military small-caliber ammunition, and military medium-caliber ammunition. So, in all four of those areas, we have not just to lead position, but by far away the strongest position. And we are continuing to take market share, even in what has become a flattening overall market. We have quite a bit of run way left to do that as we expand from the basic ammunition portfolio into a greater production market for medium-caliber guns. We intend expand beyond chain guns into additional guns, working industry partnerships. We are expanding on sporting ammunition and to sporting accessories, which carry very high margins, 30% margins, and we have a lot of growth left in that area. With respect to law enforcement, now we are expanding into simulation and training through non-lethal ammunition, as well as mark-up training centers for all the law enforcement agencies in the United States. So, we will continue to grow the ammunition business. I would ask that for the future, we think of the Ammunition Systems group more of an armament system group and that will give you a better sense of where we are headed.

Robert Stallard - Banc Of America Securities

Do you think 8% to 10% on the top-line there is achievable stuff?

Daniel J. Murphy - Chairman and Chief Executive Officer

The overall company, absolutely.

Robert Stallard - Banc Of America Securities

Just on Ammunition Systems?

John L. Shroyer - Senior Vice President and Chief Financial Officer

On Ammunition as we look out to the next year, about 6%.

Robert Stallard - Banc Of America Securities

That's great, thank you.

Operator

And moving on, we will hear from [inaudible] with Banc Of America.

Unidentified Analyst

Thank you, good morning. Just wanted to touch quickly on your free cash flow guidance for fiscal year '09. Basically, you are showing for cash flow that's flat between '08 and '09 and I am just wondering why given your growth in EPS, are just expecting to invest quite a bit in working capital?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes, the reason is the two… fiscal year '08 projection of $260 million doesn't include a $30 million cash tax benefit related to our fully funding the pension a year ago. So, on an apples-to-apples basis, this year it would be around $230 million and as we look to '09, $260 million reflects the increased revenue growth and margin improvement to around 11%.

Unidentified Analyst

Okay. And then just on the Aries I, I mean, we have seen a few reports in the press that they might have some vibration problem at the launch. Do you see it as an issue or and it seems you still have a lot of time to fix the problems, but how do you see that impacting the program?

Daniel J. Murphy - Chairman and Chief Executive Officer

Let me quote Dr. Mike Griffin in a statement he made last week. “I have rarely seen more of mountain made out less of a molehill. We have several solutions, we are working them, not even sure that any adjustments will be necessary.”

Unidentified Analyst

That's perfect. Thanks a lot. Congratulations on the quarter.

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] At this time, we will take our next question from Troy Lahr with Stifel Nicolaus.

Unidentified Analyst

Hi, thanks. This is actually [inaudible] for Troy.

Daniel J. Murphy - Chairman and Chief Executive Officer

Good morning.

Unidentified Analyst

How are you?

Daniel J. Murphy - Chairman and Chief Executive Officer

Good.

Unidentified Analyst

Good. I am wondering if you could maybe provide some insight into your thought process regarding the upcoming COTS program for NASA. If you team isn’t selected do you and your partner see yourself pursing into alternative replacement rocket with NASA clearly supporting an alternate solution on that program?

Daniel J. Murphy - Chairman and Chief Executive Officer

We are supporting three of the four competitors in the COTS competition with varying content across. We are very interested in using, as you know, our ATK generated family of rocket motors to provide very low cost solutions in the small, medium, and ultimately large rocket motor categories. And in the medium and large rocket motor categories, our intend is to rely heavily on our new RSRM that's being developed for the Aries I and Aries V being a higher performance RSRM, as well as our heritage Castor motors. We have within one of the groups, and just we’re in a competitive period now I cannot go into details, established a key partnership that can be continued beyond COTS and even outside of the COTS venue. But, I just can't any provide more detail right now.

Unidentified Analyst

Okay, fair enough. I guess, as a quick follow-up. In sort of piggybacking on the earlier MDA question, you talked a bit about the approval process. But, I've seen cynical media reports sort of mentioning the departure of a very small handful of MDA employees that sort of implies a bit cultural there, I guess, you should say after the acquisition was announced. Do you think there can be a potential risk going forward or is it just sort of one-off problem that doesn’t really concern you guys?

Daniel J. Murphy - Chairman and Chief Executive Officer

No, it' one-off. We are talking about two people out of 1,900 and that just happens that the liberal side of the Canadian media decided to make a big deal out of it. But, it's not a concern.

Unidentified Analyst

Okay, thanks a lot.

Daniel J. Murphy - Chairman and Chief Executive Officer

You are welcome.

Operator

And moving on, we will take our next question from Joe Nadol with J.P. Morgan.

Unidentified Analyst

Hi, good morning guys. Actually it’s Scott filling in for Joe. Just a couple of quick ones. You talked just a bit ago about 6% growth in Ammunition next year, I wonder if you could fill in some of the growth for the other segments, maybe John?

John L. Shroyer - Senior Vice President and Chief Financial Officer

We continue to see mission being in the largest growth engine for us in the double-digit range, 12% to 13% CAGR over the next couple of years, and then Launch Systems right around 8% to 10%.

Unidentified Analyst

And the Mission Systems growing at 12% to 13% that still continues to be the case even when you take out the, I guess, it's maybe, $250 million or so of the legacy base business?

Daniel J. Murphy - Chairman and Chief Executive Officer

Yes.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes, it ignores that.

Unidentified Analyst

Great. And then I guess the share repurchase authorization you guys had was running down and I think it even expired today and I know that that might not be as a high a priority with the MDA acquisition coming up. But, do you intend to get authorization for another repurchase?

Daniel J. Murphy - Chairman and Chief Executive Officer

We consider that in the summer timeframe every year and so that hasn't even come up for discussion yet. But, as we have said, we have three deployment objectives, acquisitions, share repurchase, and debt pay-down. This is a big acquisition, so plan for us to concentrate on debt pay-down, following this acquisition certainly for the next year.

Unidentified Analyst

And then finally, I think the last time we were on a call, we were talking about the NASA funding environment, I know, it looked good although there was some talk back then about adding $1 billion to the NASA budget and that didn't make it in. Is the funding environment for NASA still positive?

Daniel J. Murphy - Chairman and Chief Executive Officer

Yes, it is across both parties and certainly is good to see the principal candidates, both Democrat and Republic, voicing support for NASA across the spectrum of NASA programs, human space exploration, as well as science and technology. The $1 billion add, it didn't make it through the Senate, made it through the Senate appropriators and then dropped down in conference. And those sponsors had resolved to go at it again. So, I don't think we have seen the last of that potential. The remaining $17 billion plus is sufficient to continue on the schedule that NASA has in place for the Constellation or the human space exploration program.

Unidentified Analyst

Excellent. Thanks very much.

Daniel J. Murphy - Chairman and Chief Executive Officer

You are welcome.

Operator

We will take our next question from [inaudible] with Cohen & Company.

Unidentified Analyst

Thanks for taking my question. I was wonder the Lake City extension that you received, when did the terms of that actually roll in and will you see it, kind of, in your forecasting time horizon before fiscal '10? Have you had any luck kind of negotiating some protection on commodity costs?

Daniel J. Murphy - Chairman and Chief Executive Officer

The answer to the last question is yes. We are in negotiations right now with the Army customer for the specific terms and conditions of the full-year extension and we expect to warp that up probably by the late springtime. The key is that we are not going to see much difference from our current Ts and Cs [ph]. The real benefit to both us and the Army is that, we are in the middle of a monetization program with significant investment by the Army customers, as well by ATK. If we hadn't had this extension, it wouldn't have made good business sense for us to continue in the monetization effort with our own contributions. So, this is very much in the Army customers' interest to have had nailed this down. For us, of course, it's terrific to not be preparing for competition next year, but to continue to perform for the Army as we have. I hate the expression win-win, but in this case it is for both parties.

Unidentified Analyst

You guided 6% up in Amo next year. What are kinds of the big drivers within that? Is it civil… if you can just rank them and give us the growth rates? And lastly kind of, you have given us the 10% organic figure of your forecast period, where can margins go over that period? Thank you.

John L. Shroyer - Senior Vice President and Chief Financial Officer

We don't give specific guidance on the program level. Again, we expect the whole group to be around 6% for next year. Certainly, civil and medium cal will be on the higher end. We do see the small cal leveling off. In terms of the margins, I feel very good about Ammunition Systems in that mid-9% range they are running this year. They will continue to drive operating improvement initiatives in their part of our overall company goal to hit the 11% by the end of next year. As we mentioned with the MDA acquisition that we plan on closing in the first quarter that would also significantly help our company margins more toward the 12% range.

Unidentified Analyst

Okay. Thank you guys.

Operator

We will take our next question from George Shapiro with Citi.

Unidentified Analyst

Hi good morning this is [inaudible] for George.

Daniel J. Murphy - Chairman and Chief Executive Officer

Good morning.

Unidentified Analyst

It was just wondering if you could quantify the benefit for the resolution of overhead within launch.

Daniel J. Murphy - Chairman and Chief Executive Officer

That was an overhead rate matter that we resolved. We have these typically across all of our government business. And for that particular one, the overhead rate adjustment was around $6 million, most of that did roll into the quarter. I will however also point out though that in Mission Systems group, we had some one-time events with significant increases in bidding proposal costs on the strategic programs that we pursued, as well as we did take a $3 million bad debt provision on an uncollectible receivable for the quarter.

Unidentified Analyst

Okay. Great. And my follow-up is, could you just give us the growth rates maybe within Ammunition for civil and medium, does that imply that small caliber was about flattish?

Daniel J. Murphy - Chairman and Chief Executive Officer

I just answered the previous question, we don’t gives the details there. Again, overall 6%, civil and medium cal will lead the way, and small cal, we do see being fairly level.

Unidentified Analyst

I was just asking for this quarter specifically.

Daniel J. Murphy - Chairman and Chief Executive Officer

Civil was up 20%… 20ish percent for the third quarter in a row.

Unidentified Analyst

Okay. Great, thanks.

Operator

We’ll take our next question from Herb Hardt with Monnes.

Herb Hardt - Monnes

Good morning. Curious as to what your anticipation is for MDA business in Canada? Is there growth there, I know the things you can do in the US?

Daniel J. Murphy - Chairman and Chief Executive Officer

Herb, we are looking to the Canadian part of the space group to grow our international space business. The bulk is… geographically… will be Canada as the steppingstone to the external US market, where MDA has already established a presence in 35 different countries. We are very impressed with the leadership, the knowledge base, and the international network that MDA as established, and we intend to capitalize on all three.

Herb Hardt - Monnes

Thank you.

Operator

[Operator Instructions] Will take a follow up from Robert Spingarn with Credit Suisse.

Robert Spingarn - Credit Suisse

Dan, I guess we’ll probably find out next week, but have you gotten any indication about PGMM getting into the '09 budget?

Daniel J. Murphy - Chairman and Chief Executive Officer

It's still at play. It's been a very frustrating experience frankly. There are so many competing priorities right now… urgent priorities as Field Commanders weighing [ph] with merging requirements. We do know that both the US commands in Afghanistan and Iraq have labeled the need for a PGMM urgent, and we expect to get final resolution from the Army in the next 90 days. In the interim, our contract has been extended 90 days, so that there is not an interruption as the deliberations continue.

Robert Spingarn - Credit Suisse

Okay. It looks like the increase in the size of the military is a done deal now, which I would imagine would necessarily increase the training requirement for small cal. What is your sense or you plan? Do you think that incremental piece will go to the small cal second source or do you think you can capture it?

Daniel J. Murphy - Chairman and Chief Executive Officer

We will get most of it. We will get 80% of it or better in my estimation. It’s true, as we talk about small cal being flat and declining, the increased force structure is not yet been baked in to the Army planning process.

Robert Spingarn - Credit Suisse

That sounds good. Thank you.

Daniel J. Murphy - Chairman and Chief Executive Officer

You are welcome.

Operator

We will take our next question from [inaudible] with Barclays Capital.

Unidentified Analyst

Good morning. I was wondering if you could share any of your thoughts on the financing market as it relates to the MDA acquisition and are you able to tell us weather that would be a combination of loans and bonds to finance that?

Daniel J. Murphy - Chairman and Chief Executive Officer

As we said in the call a couple of weeks ago, we have fully committed financing. We do expect the interest rates in the 8% range and we are still holding pretty true to that across the board. And as we get closer to the close date here we will be able to provide some more details on the mix of the financing.

Unidentified Analyst

Thank you.

Operator

Follow-up question from Robert Stallard with Banc Of America.

Robert Stallard - Banc Of America Securities

Just to follow up on the pension, which is creating a big benefit to margins over the last few quarters. We know what the Fed done the discount rate, how do you expect pension expense to track over the next couple of years?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Right now, our assumed discount rate is 6.1%, Rob, from last year. Our measurement date is 12/31. Certainly, the near-term rates are improving as we all know, but as you look out at the 10-year rates where most of our population is actually doing fairly well, so the rate today is actually a little bit north of 6.1%. So, I am optimistic though by the end of March we will be able to still be in that same range and still be in the low $40 million range for our pension expenses next year. But, I will not go out another year, a lot of time between now and then.

Robert Stallard - Banc Of America Securities

Dan, just go up on a couple of programs talked about in the past. First of all, the composites, has there been any progress on your aerospace efforts there, particularly with regard to the A350?

Daniel J. Murphy - Chairman and Chief Executive Officer

Yes, we are in the process now… discussions with Airbus and with a French partner concerning a unique capability that we have. Those discussions have included exchange visits to our facilities. We’re quite optimistic frankly that we will be able to make a significant contribution to the A350. Regrettably, I cant say anything more about it right now for proprietary reasons.

Robert Stallard - Banc Of America Securities

And on mission aircraft, which again has been another good area for you over the last twelve months, how is that being progressing? Do you still see the opportunity there for market share expansion?

Daniel J. Murphy - Chairman and Chief Executive Officer

Absolutely. We've nearly doubled that business in two years and we are on path for nearly doubling it again over the next couple of years. The international marketplace is a very attractive one for us, because as with so much else that we strive to do, our products are affordable, they are fordable to countries that don't have the deep pockets that the United States does. So, we are providing the Iraq Air Forces with intelligence, surveillance, and reconnaissance aircraft, the Canadian Navy, and we are reaching out to other countries, including those in the Persian Gulf.

Robert Stallard - Banc Of America Securities

And just as a final question, I think in the past you've given an idea of how much of the next year’s sales were already in the book. As you look out to fiscal '09, what's you estimate of how much you already have in firm booking?

Daniel J. Murphy - Chairman and Chief Executive Officer

I think pretty consistent with past years, around the 70% range by the end of our fiscal year here.

Robert Stallard - Banc Of America Securities

Great. Thanks very much.

Operator

And there appear to be no further questions at this time.

Daniel J. Murphy - Chairman and Chief Executive Officer

All right. Then we'll wrap it up. Again, thank you each of you for joining us today and it was crowded schedule this morning, a number of different calls. We always do appreciate your interest and will be talking with you. Thank you. Bye.

Operator

That does conclude today's conference. Thank you all for your participation and have a wonderful day.

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